nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2018‒01‒22
fourteen papers chosen by

  1. Economic efficiency of public secondary education expenditure: how different are developed and developing countries? By Juliana Arias Ciro; Alejandro Torres Garci?a
  2. Supply-side labour market reforms: a neglected cause of the productivity crisis By Alfred Kleinknecht
  3. Working Paper 11-17 - Growth and Productivity in Belgium By Bernadette Biatour; Chantal Kegels
  4. Does Country Size Affect the Relationship between Population Density and Labour Productivity? Theory and Evidence for Europe By José Pedro Pontes; Patrícia Melo
  5. Investment in productivity and the long-run effect of financial crises on output By de Ridder, Maarten
  6. The Effects of Land Markets on Resource Allocation and Agricultural Productivity By Chaoran Chen; Diego Restuccia; Raül Santaeulàlia-Llopis
  7. Testing the Productivity Bias Hypothesis in Middle East Countries By HALICIOGLU, Ferda; Ketenci, Natalya
  8. Understanding the effect of measurement error on quantile regressions By Andrew Chesher
  9. Constructive Identification of Heterogeneous Elasticities in the Cobb-Douglas Production Function By Tong Li; Yuya Sasaki
  10. Individual and Field Citation Distributions in 29 Broad Scientific Fields By Costas, Rodrigo; Ruiz-Castillo Ucelay, Javier
  11. The financial and real performance of non-financial corporations in the Euro area: 1999-2015 By Vicente Salas; Lucio San Juan; Javier Vallés
  12. Endogenous Production Networks By Daron Acemoglu; Pablo D. Azar
  13. Tradability and Productivity Growth Differentials Across EU Member States By Klaus S. Friesenbichler; Christian Glocker
  14. Resolving China's Zombies: Tackling Debt and Raising Productivity By W. Raphael Lam; Alfred Schipke; Yuyan Tan; Zhibo Tan

  1. By: Juliana Arias Ciro; Alejandro Torres Garci?a
    Abstract: This study measures the efficiency of public secondary education expenditure in 35 developing and developed countries using a two-step semi-parametric DEA (data envelopment analysis) methodology. First, we implement two cross-country frontier models for the 2009-2012 period: one using a physical input (i.e., teacher-pupil ratio) and one using a monetary input (i.e., government expenditure per secondary student). These results are corrected by the effects of GDP per capita and adult educational attainment as non-discretionary inputs. We obtain four important results: (i) developed and developing countries have the same education production processes when they are compared using physical inputs but not when compared using monetary inputs; (ii) developing countries could increase their enrollment rates and PISA scores by approximately 9% and 5%, respectively, by maintaining the same teacher-pupil ratios and public spending levels as developed countries; (iii) Ireland, Japan and Korea are efficient countries in the two frontier models (Colombia is also included in this category when the teacher-pupil ratio is used as input); and (iv) robust empirical evidence indicates that both income and parental educational attainment positively affect the efficiency of public education in both models.
    Keywords: Secondary education, government expenditure, efficiency, DEA.
    JEL: H52 I22
    Date: 2017–12–14
  2. By: Alfred Kleinknecht
    Abstract: In spite of impressive stories about a Second Machine Age or Industry 4.0, growth rates of labor productivity in the US, Japan and Western Europe declined, during the last 10-15 years, to their lowest levels since World War II. Recent contributions on the productivity slowdown by mainstream economists produced an impressive amount of statistical data that certainly add to our understanding, but they fail addressing the negative impact of supply-side labor market reforms on innovation and productivity. I present theoretical arguments of how labor market deregulation can negatively influence innovation and productivity growth and I review empirical evidence.
    Keywords: Varieties of capitalism; structural reforms of lab or markets; innovation; productivity crisis
    JEL: J53 K31 O31
    Date: 2017–12
  3. By: Bernadette Biatour; Chantal Kegels
    Abstract: The objective of the report is to provide an overview of the main drivers of economic growth and the productivity evolution in Belgium, in comparison with its three neighbouring countries and the US over 1970 and 2015. Recent evolutions, over 2000-2015, are analysed in details in order to shed light on the impact of the great recession. The growth accounting methodology is applied to explain labour productivity growth for the total economy, manufacturing and market services.
    Keywords: Growth accounting, Growth contribution, Productivity, MFP, Structural change
    JEL: O11 O33 O40 O47
    Date: 2017–10–17
  4. By: José Pedro Pontes; Patrícia Melo
    Abstract: The empirical literature on the relationship between labour productivity and urbanisation economies has considered the presence of variable returns to density, but it has not investigated the existence of a heterogeneous relationship according to country size. This paper proposes a theoretical model which can explain why the relationship between regional labour productivity and population density may differ in strength between small and large countries. To test the proposed theory, we carry out an empirical regression analysis using NUTS2-level data on GDP per capita and population density for the EU28 countries. The results from the empirical analysis corroborate the theoretical model and indicate the relationship is linear and stronger for regions in small countries compared to large countries.
    Keywords: Labour Productivity; Population Density; Economic Development; Country Size
    JEL: O11 O14 O15 R11 R12
    Date: 2018–01
  5. By: de Ridder, Maarten
    Abstract: This paper analyzes the channels through which financial crises exert long-term negative effects on output. Recent models suggest that a shortfall in productivity-enhancing invest- ments temporarily slows technological progress, creating a gap between pre-crisis trend and actual GDP. This hypothesis is tested using a linked lender-borrower dataset on 519 U.S. corporations responsible for 54% of industrial research and development. Exploiting quasi-experimental variation in firm-level exposure to the 2008-9 financial crisis, I show that tight credit reduced investments in productivity-enhancement, and has significantly slowed down output growth between 2010 and 2015. A partial-equilibrium aggregation exercise suggests output would be 12% higher today if productivity-enhancing investments had grown at pre-crisis rates.
    Keywords: Financial crises; endogenous growth; innovation; business cycles
    JEL: E32 E44 O30 O47
    Date: 2016–09–30
  6. By: Chaoran Chen; Diego Restuccia; Raül Santaeulàlia-Llopis
    Abstract: We assess the role of land markets on factor misallocation in Ethiopia—where land is owned by the state—by exploiting policy-driven variation in land rentals across time and space arising from a recent land certification reform. Our main finding from detailed micro data is that land rentals significantly reduce misallocation and increase agricultural productivity. These effects are nonlinear across farms—impacting more those farms farther away from their efficient operational scale. The effect of land rentals on productivity is 70 percent larger when controlling for non-market rentals—those with a pre-harvest rental rate of zero. Land rentals significantly increase the adoption of new technologies, especially fertilizer use.
    JEL: E02 O11 O13 O55 Q1
    Date: 2017–11
  7. By: HALICIOGLU, Ferda; Ketenci, Natalya
    Abstract: The divergence of the purchasing power parity from the equilibrium exchange rate is attributed to various factors. Productivity differentials between the countries are said to be one of the main sources, which lead to productivity bias hypothesis. The hypothesis suggests that a relatively more productive country should experience a real appreciation of its currency. This research aims at testing the hypothesis in Middle East countries using the time series data over the period of 1970-2015 and by employing ARDL approach to cointegration. The econometric results support for the hypothesis is only in the cases of Bahrain, Kuwait, and Saudi Arabia. This research also provides policy recommendations on the basis of empirical results.
    Keywords: Productivity bias hypothesis, cointegration, Middle East countries
    JEL: C2 C21 C22 E31 F30
    Date: 2017
  8. By: Andrew Chesher (Institute for Fiscal Studies and University College London)
    Abstract: The impact of measurement error in explanatory variables on quantile regression functions is investigated using a small variance approximation. The approximation shows how the error contaminated and error free quantile regression functions are related. A key factor is the distribution of the error free explanatory variable. Exact calculations probe the accuracy of the approximation. The order of the approximation error is unchanged if the density of the error free explanatory variable is replaced by the density of the error contaminated explanatory variable which is easily estimated. It is then possible to use the approximation to investigate the sensitivity of estimates to varying amounts of measurement error.
    Keywords: measurement error, parameter approximations, quantile regression.
    Date: 2017–05–10
  9. By: Tong Li; Yuya Sasaki
    Abstract: This paper presents the identification of heterogeneous elasticities in the Cobb-Douglas production function. The identification is constructive with closed-form formulas for the elasticity with respect to each input for each firm. We propose that the flexible input cost ratio plays the role of a control function under "non-collinear heterogeneity" between elasticities with respect to two flexible inputs. The ex ante flexible input cost share can be used to identify the elasticities with respect to flexible inputs for each firm. The elasticities with respect to labor and capital can be subsequently identified for each firm under the timing assumption admitting the functional independence.
    Date: 2017–11
  10. By: Costas, Rodrigo; Ruiz-Castillo Ucelay, Javier
    Abstract: Using a large unique dataset consisting of 35.1 million authors and 105.3 million articles published in the period 2000-2016, which are classified into 29 broad scientific fields, we search for regularities at the individual level for very productive authors with citation distributions of a certain size, and for the existence of a macro-micro relationship between the characteristics of a scientific field citation distribution and the characteristics of the individual citation distributions of the authors belonging to the field. Our main results are the following two. Firstly, although the skewness of individual citation distributions varies greatly within each field, their average skewness is of a similar order of magnitude in all fields. Secondly, as in the previous literature, field citation distributions are highly skewed and the degree of skewness is very similar across all fields. However, the typical pattern at the field level results from the combination of its basic skewness, solely dependent on the skewness at the individual level, and the heterogeneity of individuals with respect to the number of publications per author and their mean citation rates. These results have important conceptual and practical consequences: to understand the skewness of citation distributions at any aggregate level we must simply explain the skewness of the individual citation distributions of their very productive authors.
    Date: 2018–01–01
  11. By: Vicente Salas (Universidad de Zaragoza); Lucio San Juan (Banco de España); Javier Vallés (Banco de España)
    Abstract: This paper documents the aggregated performance of non-financial corporations in the largest euro area economies and compares it with the performance of the US corporate sector as reported by National Economic Accounts and Financial Accounts. We find significant cross-country structural differences in the behaviour of real and financial indicators that remain long after the creation of the single currency, although therehas been convergence in the average cost of debt paid by corporations and in the deleveraging process unfolding after the financial crisis. German corporations stand out, with higher productivity of operating capital and profit margins. Moreover, a lower average cost of debt and also a lower average corporate tax rate have contributed to a higher return of equity in Germany compared with the return in other EU countries and the US. Since the crisis years, German and Spanish companies have joined the US corporations in saving more than they invest. We also find some evidence of a declining proportion of cash-flows allocated to capital investment.
    Keywords: Non-financial corporations, Sectoral National Accounts, financial performance, rates of return of assets and equity, euro area
    JEL: G30
    Date: 2017–12
  12. By: Daron Acemoglu; Pablo D. Azar
    Abstract: We develop a tractable model of endogenous production networks. Each one of a number of products can be produced by combining labor and an endogenous subset of the other products as inputs. Different combinations of inputs generate (prespecified) levels of productivity. Markets are “contestable” in the sense that production technologies are available to a large number of potential producers. We establish the existence and uniqueness of an equilibrium with an endogenous production network and provide comparative static results on how prices and endogenous technology choices (and thus the production network) respond to changes in parameters. These results show that improvements in technology (or reductions in distortions) spread throughout the economy via input-output linkages and reduce all prices, and under reasonable restrictions on the menu of production technologies, also lead to a denser production network. Using a dynamic version of the model, we show that the endogenous evolution of the production network could be a powerful force towards sustained economic growth. At the root of this result is the fact that the arrival of a few new products expands the set of technological possibilities of all existing industries by a large amount — that is, if there are n products, the arrival of one more new product increases the combinations of inputs that each existing product can use from 2 n-1 to 2 n , thus enabling significantly more pronounced cost reductions from the choice of optimal technology combinations. These cost reductions then spread to other industries that benefit from lower input prices and are further incentivized to adopt additional inputs.
    JEL: C67 E10 E23 L23 O41
    Date: 2017–12
  13. By: Klaus S. Friesenbichler (WIFO); Christian Glocker (WIFO)
    Abstract: This study examines the lack of convergence among EU countries from a structural perspective. We apply the tradable-non-tradable framework (T-NT) to evaluate the heterogeneity in labour productivity before and after the great recession. We find that, across all countries, non-tradables were less relevant for aggregate productivity. The low productivity growth in peripheral EU countries was accompanied by a specific structural change pattern: there was a sharp production increase of non-tradables before the crisis relative to other EU countries. For most peripheral countries concerns about unfavourable sector structures remain, implying a continuation of unsustainable growth patterns. This has implications for the European Commission's macroeconomic imbalance procedures, since it allows identifying patterns of real divergence on a disaggregated level. Finally, we identify a link between sectoral growth asymmetries and the quality of domestic governance institutions. Especially differences in the legal system help to explain the observed productivity growth differentials.
    Keywords: Tradability, Labour Productivity, Growth, Institutions, EU, Imbalance
    Date: 2018–01–08
  14. By: W. Raphael Lam; Alfred Schipke; Yuyan Tan; Zhibo Tan
    Abstract: Nonviable “zombie” firms have become a key concern in China. Using novel firm-level industrial survey data, this paper illustrates the central role of zombies and their strong linkages with stateowned enterprises (SOEs) in contributing to debt vulnerabilities and low productivity. As a group, zombie firms and SOEs account for an outsized share of corporate debt, contribute to much of the rise in debt, and face weak fundamentals. Empirical results also show that resolving these weak firms can generate significant gains of 0.7–1.2 percentage points in long-term growth per year. These results also shed light on the ongoing government strategy to tackle these issues by evaluating the effects of different restructuring options. In particular, deleveraging, reducing government subsidies, as well as operational restructuring through divestment and reducing redundancy have significant benefits in restoring corporate performance for zombie firms.
    Date: 2017–11–27

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